AUSTIN, Texas--(BUSINESS WIRE)--Fitch Ratings has assigned an 'AA+' rating to the following Arlington,
Texas (the city) limited tax securities:

--$14.9 million permanent improvement bonds (the bonds), series 2014

--$29.7 million combination tax and revenue certificates of obligation
(COs), series 2014

The bonds are scheduled for competitive sale on June 10. Proceeds from
the 2014 bonds and COs will be used for a variety of governmental
improvements and projects. In addition, Fitch affirms its ratings on the
following securities:

--$338.8 million in outstanding bonds and COs at 'AA+';

--$226.9 million in special tax bonds at 'A+'.

The Rating Outlook for the bonds and COs is revised to Positive from
Stable.

The Rating Outlook on the special tax bonds is Stable.

SECURITY

The bonds and COs are secured by an ad valorem tax levied on all taxable
property within the city, limited to $2.50 per $100 taxable assessed
valuation (TAV). COs are also secured by a pledge of limited surplus
revenues ($1,000) of the city's water and waste water system.

The special tax bonds are secured by a first lien on pledged special
taxes and pledged accounts. The pledged taxes consist of a citywide 0.5%
sales and use tax, a 5% tax on short-term motor vehicle rentals, and a
2% hotel occupancy tax. The series 2005C bonds are secured further by
annual rental payments from the National Football League's Dallas
Cowboys and a portion of annual stadium naming rights fees.

KEY RATING DRIVERS

POSITIVE OUTLOOK: The positive outlook reflects consistently strong
financial management and a trend of growth in the city's tax and
employment base.

FAVORABLE LOCATION IN DFW: Arlington benefits from its central location
in the Dallas-Fort Worth (DFW) metropolitan area and status as a
regional hub for entertainment and tourism. Job growth is continuing and
unemployment is relatively low.

STRONG FINANCIAL PROFILE: The city's stable financial position reflects
revenue diversity, healthy reserves and ample liquidity. Management is
conservative with a strong planning and control environment.

SATISFACTORY COVERAGE; CLOSED LIEN: Coverage of special tax bonds
remains satisfactory. The lien is closed with no alternative or
competing uses for the special tax revenues.

RATING SENSITIVITIES

FINANCIAL FLEXIBILITY: The city's ability to maintain its strong
financial position, reflected in structurally balanced operations and
healthy reserves, will likely lead to positive rating action.

CREDIT PROFILE

Arlington is located in the center of the DFW metroplex and has an
estimated 2014 population of about 366,000. The city is home to the
Dallas Cowboys and Major League Baseball's Texas Rangers.

DIVERSE, RESILIENT ECONOMY IN THE HEART OF DFW

The city is home to diverse manufacturing, distribution, and retail
trade given its central location in DFW, proximity to the DFW
International Airport, and well-developed highway transportation
network. Tourism is also a significant component of the local economy
given the presence of popular amusement parks and professional sports
franchises, which are a major draw for residents from the area and
around the state. Higher education rounds out the economic base with the
presence of The University of Texas-Arlington (UTA), a growing 34,000
enrollment campus that continues to invest in facility improvements.

Arlington's broad tax base is without taxpayer concentration. TAV
realized modest growth over the past three years after a recessionary
dip in fiscal 2011. Fitch considers the city's expectation for near term
TAV gains approximating 3% per annum reasonable based on a strengthening
housing market and ongoing commercial and industrial development.

The city continues to outpace the nation in job growth. Arlington's
March 2014 unemployment rate improved to 5% from 5.8% in March 2013 due
to growth of its employment base. This unemployment rate compares
favorably to the state (5.3%) and national averages (6.8%) for the same
period.

PRUDENT FINANCIAL POLICIES

Fitch views the city's financial practices and reserve policies as
positive credit factors. The city maintains a 15% minimum general fund
balance policy. Included therein are a one-month working capital
reserve, an unallocated reserve for emergencies, and a business
continuity reserve that provides funding for operational needs as-needed.

In addition, the city maintains a community foundation dedicated to
cultural/quality of life projects and neighborhood revitalization. The
endowment is funded primarily from natural gas lease and royalty
payments and could be used for general purposes, if needed, with
supermajority approval of the council. The endowment has grown
substantially since its incorporation in 2007 and has a current balance
of $102 million.

SOLID FINANCIAL PROFILE

Property taxes and sales taxes are the primary revenue sources,
comprising about 36% and 25% of fiscal 2013 general fund revenues,
respectively. The city undertook cost saving measures to largely offset
muted revenue growth during the recession.

Fiscal 2013 unrestricted reserves of $55.5 million represent a solid
25.3% of spending after the application of previously assigned funds for
capital and project priorities. Based on fiscal year to date performance
the city projects completing fiscal 2014 with $53.5 million in
unrestricted general fund reserves, reflecting a $1.5 million budgeted
application for technology improvements. The city's operations are
structurally balanced and officials anticipate maintaining strong
reserves in excess of their policy floor.

MANAGEABLE DEBT; WELL-FUNDED PENSIONS

Fitch anticipates the city's moderate overall debt (4.9% of market
value) to remain manageable. To support its five year capital plan
requirements and supplement $59 million in current capacity, the city
anticipates seeking GO authorization for up to $190 million in 2014 for
capital needs in 2016 through 2019. Arlington's manageable capital plan
reflects the city's maturity and disciplined attention to infrastructure
needs.

Pension benefits are provided through the Texas Municipal Retirement
System (TMRS), an agent multiple-employer plan. The city's pension is
well funded at 87.2% as of Jan. 1, 2013. The city's OPEB unfunded
liability is modest at $107.5 million (less than 1/2 of 1% of MV) and
projected to decline based on recent plan changes that shift an
increasing share of costs to retirees. Fiscal 2013 carrying costs (debt
service, pension and OPEB contributions) account for an above average,
but manageable, 28% of governmental spending. However, with debt service
totaling 21% of spending, the elevated burden primarily reflects the
city's rapid amortization rate of 67.4% in 10 years. Fitch believes the
carrying cost budget burden should trend down as debt rolls off and new
issuance plans are limited.

SATISFACTORY COVERAGE OF SPECIAL TAX BONDS

Coverage of the special tax stadium bonds remains satisfactory due to
growth of the pledged tax revenues. Fiscal 2013 pledged tax revenues and
rent payments covered maximum annual debt service (MADS) a solid 1.3x,
and 1.2x based on tax revenues alone (excluding rent revenues). No new
money debt secured by the pledged revenues may be issued under the
indenture. The master ordinance limits the use of taxes to pay debt
service, replenish reserve funds, or redeem bonds since the project is
complete.

The pledged tax revenues demonstrated modest sensitivity to the
recession but have generally remained on a positive trajectory realizing
3.7% average annual growth over the past seven years, with a solid
fiscal 2013 gain of 4.3%. Fitch expects coverage will remain sound over
the near term given the economic trends in the city and addition of
several marquee events at the stadium (annual Cotton Bowl, the Academy
of Country Music Awards, the 2014 NCAA Final Four, and the 2015 College
Football Championship).

In addition to the sources of information identified in Fitch's
Tax-Supported Rating Criteria, this action was additionally informed by
information from Creditscope, University Financial Associates,
S&P/Case-Shiller Home Price Index, IHS Global Insight, National
Association of Realtors.

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